Sales Tax Might Be Close to Simplifying — Again



Rep. Debbie Lesko, R-Glendale, who has been leading the charge on the effort to simplify Arizona’s sales tax, said she’s done negotiating with cities and contractors on the bill.

Lesko said she thinks they’ve hit on a plan that will work and expects things to move quickly.

Reports have indicated the bill would be both a boon and a burden to the state. Some analyses suggest the bill could cost the cities or the general fund millions.

House Speaker Andy Tobin, R-Prescott Valley, said the effort to simplify the tax is like an up-and-down roller coaster, but it’s still cooking.

“We’re simplifying. Very complexing,” Tobin said. “That thing has been in every back door meeting I can possibly think of and everybody’s having a piece of it so I’m waiting for final draft. There’s too many good things in it that I don’t want to lose—yet we still have to make sure we’re not hurting people."

Ken Strobeck, the executive director of the Arizona League of Cities and Towns, said things are still in negotiations and that while he felt they had come to a "close if not final" agreement as far as details on auditing, construction still posed a big challenge.

The cities have been in constant talks with Lesko and others working on the simplification plan. Lesko said the cities told her they happy with the current plan, but said she’s heard that they were happy before and then heard they changed their mind.

“I have found that [the cities] move the goal post,” Lesko said. "They agree on something and then they change their mind. It’s going to be whatever the Governor and the Legislature believes is best. We are not going to wait until the cites agree with everything they want. We don’t want to hurt the cities, but we need to move forward.”

The current plan is to mostly leave construction alone, Lesko said. The exception will be any contractor who “repairs, replaces or maintains,” such as people in the plumbing or air conditioning business, she said. They will only pay construction tax on materials.

Cities of less than 5,000 people would be held harmless from the loss of construction tax on these contractors through adjustments with the shared revenue fund, Lesko said.

As far as auditing, which has also been contentious, Lesko said cities would be able to audit businesses that are within their jurisdiction on behalf of the city and the state. The city auditors would be trained and certified to the Department of Revenue. Only the Department of Revenue auditors would audit businesses with multiple locations. This prevents business owners who have multiple locations from being excessively audited.

"It's a matter of the cities trying to protect their own city auditors. The cities really pushed for that so we said OK," Lesko said.

It’s possible the bill could get roped into negotiations about the budget and Medicaid expansion because Republican leadership knows it is a key bill that the governor wants to see pass, Lesko said.

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